Number of buy-to-let mortgages available hits 1,000

by Jason McClean

3 years ago

Number of buy-to-let mortgages available hits 1,000

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Number of buy-to-let mortgages available hits 1,000

The number of buy-to-let mortgages available to landlords on the market has hit the 1,000 mark, representing a seven-year high.thousand

This is the first time since April 2008 that the number of mortgage products has hit 1,000, according to a Moneyfacts report.

The boom can be attributed to new demand from thousands of pensioners making the most of the new pension freedoms, according to experts.

“Many retirees are looking towards buy-to-let and the increased range of products, many with increased age limits, reflects this,” says a spokesperson for Property 118’s landlord providers Discount Insurance.

The wider range in products has been accompanied by falling average interest rates, which have dropped by around 3% over the same period.

The Mortgage Works for example have reduced their rates by up to 0.5% on some buy-to-let products meaning some of their lowest interest rates ever.

These improved rates mean investors have the opportunity to make even bigger returns on their investment.

“Despite forthcoming changes in taxation, buy-to-let remains a very attractive proposition for many, especially those looking to invest lump sums from their pensions,” added the spokesperson.

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Comments

Dr Rosalind Beck

3 years ago

This is so short-sighted. It might be okay for a year or two, but what about when interest rates rise, as they inevitably will? Who wants to then have a mortgage on which you can't offset the costs of the interest payments? It's a massive gamble and I wouldn't do it, if I wasn't already in this game.

ray selley

3 years ago

Anybody whether they be broker or lender had better cover their backs by advising the borrower of what is about to hit them.This will end up as the next mis selling scandal without doubt. PPI claims firms get ready to make another fortune. Probably a vast majority of mortgage brokers havn't a clue of about the BTL ARMAGEDDON that's coming .I trawl four oft he brokers trade magazines most days and so far only one magazine Mortgage Strategery has touched on the subject..Most brokers are one man bands working from home either directly regulated by the FCA or are appointed representatives of Mortgage Networks.While most BTL mortgages are not currently regulated by the FCA the broker needs to cover his or her back by advising the borrower of the implications of the summer budget in writing and asking the borrower to confirm in writing that they fully understands the implications.I would advise all BTL lenders to do the same

3 years ago

So I was talking to my broker last week....having my own business I have to use a specialist broker....I was suprised to hear that he can get me a limited company mortgage for 4.07....that is not much higher than buying under my own name. I really don't understand why someone new to the market would not now go incorporated....either than the fact that you would need to pay at least a grand per year in accounting fees....although that you can also offset.

Roger Rabbit

3 years ago

BTL mortgages are still considerably more expensive than owner mortgages. I did some sums on a BTL a few days ago and the fees andinterest over a two year fix for the BTL was £11k more than the owner mortgage with both putting down 25%.

So there may well be 1,000 BTL mortgages but they really ahould be more competitive.

Also a lot of the competitive lenders have very restrictive lending. For example last time I checked the post office BTL mortgages were competitive but they don't give out mortgages if you have 5BTLs or more already. Likewise BM mortgages also seemed relatively good value but they inly gove out 3 mortgages woth theor group and no more. The companies that dont have these restrictions tend to be a lot more expensive.

Having said that maybe I haven't reserched it enough yet

Mark Shine

3 years ago

HSBC and others classify an applicant for a residential mortgage for their own home as 'professional landlord' who they won't lend to, if that applicant owns 4 or more properties.

Dr Rosalind Beck

3 years ago

I noticed things tightening up when I got a residential mortgage January 2008. The first mortgage company turned us down! Something that had never happened before. Also got turned down another time because of Japanese Knotweed bordering the property - about 30 metres away - in case it got under the foundations of the house. I'll be aiming to remortgage again in January - God knows if the rules have changed again over the last two years (the knotweed has gone luckily - more-or-less).

Jason McClean

3 years ago

Thanks for the comments guys. I can't help but think there will be a big shake up in BTL mortgage provision when the new tax laws come in. Higher interest rates/fees are not sustainable when they are taxed as profit. If something doesn't happen, then landlords will be forced to sell up.

I agree with Ray - Armageddon for BTL landlords that need mortgages.

The wealthy landlords without mortgages will be business as usual - nearly.

Jon Pipllman

3 years ago

Yes, the risk profile of leveraged BTL has changed as a result of the proposed budget changes and it will likely change again as the effects of that filter through to the market.

Having though about this for a while now, I wouldn't lend any of my own money on an IO basis against UK property just now. If I was lending on a repayment basis, I wouldn't touch anything >50% LTV, I would charge base +5% and require rent > 155% of mortgage payment. I would also want to inspect the property before deciding to lend and then inspect annually with the right to withdraw the facility (with full repayment) if the property was not being maintained properly.

But, if I was a bank that can create money out of thin air, I would be less fussy and the offers on the market now do look about right on the basis that the money lent is, essentially, free to the lender.

Roger Rabbit

3 years ago

Money isn't free to the lenders. Banks in many cases borrow short and lend long. So their costs are in the region of 1% and they lend to homeowners at 2% or BTL at 4% so that difference of 1% or 3% needs to pay all their costs and risk. (Plus the mortgage fees that are so common theses days)

As for risk in lending to BTL it's very low as they take a 25% deposit. Prices would need to crash in excess of 25% to trigger losses. If there was true competition in the BTL mortgage sector I would have thought that there would have been plenty of libor +1% for term type deals

Jon Pipllman

3 years ago

Reply to the comment left by "Roger Rabbit" at "02/09/2015 - 10:47":

Your understanding of how commercial banks work is, simply, wrong. Commercial banks create money by making loans, they do not borrow short and lend long (some 'building socities' might still work on that model, but not many)

The BoE published an easily readable paper on this in Q1 2014 "Money creation in the modern economy"

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

I also disagree with your assessment that the 'risk in lending to BTL is very low as they take a 25% deposit.' I think the risk is higher than current loan costs are priced for. I think there is a very real risk that the value of a fairly big chunk of 'typical' BTL properties could fall by more than 25%, that rents on such properties could also fall (by a couple of % in real terms between now and 2020) and that a number of BTL landlords will find themselves insolvent as a result of the proposed budget changes.

In such an insolvency, the first charge over the property is massively diluted, as any properties sold in the receivership are subject to CGT tax deductions before anything else.

So, whilst I am not surprised that there are more BTL loans available (given the tightening of owner occupier mortgage lending criteria where else is lending growth coming from?), I am surprised at how cheap they are.

However, a BTL landlord in a strong position (<50% leverage, strong cashflow, other assets / income, well maintained properties and clear evidence of a successful track record in the field) should be able to get a good deal now and, maybe, a better deal in the near future.

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